| Wed 14 Nov 2007, 8:30 | | ACL - ArcelorMittal South Africa - Unaudited Group |
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ACL
ACL
ACL - ArcelorMittal South Africa - Unaudited Group Earnings And Physical
Information For The Quarter Ended 30 September 2007
ArcelorMittal South Africa Limited
(formerly Mittal Steel South Africa Limited)
Registration number: 1989/002164/06
Share code: ACL
ISIN: ZAE000103453
("the Company" or "the Group")
UNAUDITED GROUP EARNINGS AND PHYSICAL INFORMATION FOR THE QUARTER ENDED 30
SEPTEMBER 2007
FINANCIAL RESULTS
Headline earnings for the quarter of R1 041 million decreased by 35% compared to
the previous quarter and by 29% compared to the corresponding period last year.
However, on an operating income level the decreases were only 9,5% and 0,8%
respectively.
The decrease in headline earnings from the corresponding period last year was
mainly due to lower sales volumes, an increase in cost, a loss on foreign
exchange rates and financial instruments and tax of R238 million due to STC on
the capital reduction during the previous quarter. This was partially offset by
higher steel prices.
MARKET REVIEW
International
Export volumes for the quarter increased by 19% compared to the previous quarter
but decreased by 1% compared to the corresponding period last year. Export
volumes are mainly a function of production volumes and the quantity of products
available after the domestic demand has been satisfied.
Average net export prices realised during the past quarter remained strong and
improved marginally (2%) compared to the previous quarter with most
international markets moving sideways from the second quarter. However, compared
to the corresponding period last year we experienced an increase of 6%.
Domestic
Domestic sales volumes during the quarter decreased by 3% compared to the
previous quarter and by 12% compared to the corresponding period last year,
driven by the impact of the higher interest rates on the demand for durable
goods as well as customers reducing inventory to normal levels.
PRODUCTION
Liquid steel production for the quarter increased by 14% compared to the
previous quarter following the reline of one of the Blast Furnaces at
Vanderbijlpark Works during quarter two. However, this was still 4% below the
corresponding period last year mainly due to the Blast Furnace reline period
that was extended to the middle of July, cold conditions experienced for two
weeks shortly after the startup as well as a major maintenance shutdown at
Saldanha Works.
COST
Cash cost per ton of hot rolled coil for the quarter increased by 20% compared
to the corresponding period last year while the cash cost of billets increased
by 12%. The increases were mainly driven by a substantial increase in the cost
of domestic coal, scrap, iron ore and alloys. The increase in the cost of hot
rolled coil was further aggravated by the increase from quarter two to quarter
three as set out below.
Compared to the previous quarter, the cost of hot rolled coil increased by 7%
while billets remained almost unchanged. The increase in the cost of hot rolled
coil was mainly due to a major planned maintenance shutdown at the Saldanha
Works during July 2007. This also resulted in a higher consumption of expensive
imported pellets and hot bricketed iron in order to minimise production losses
as well as a higher fuel rate required during the startup. At Vanderbijlpark
Works costs were also negatively impacted by higher fuel rates during the start-
up of the Blast Furnace and during the period it experienced cold conditions.
This was partially offset by the impact of higher production volumes at the
Vanderbijlpark Works.
CONTINGENT LIABILITIES
The Alternative Dispute Resolution process followed with SARS regarding the tax
deductibility of the payments made in terms of the Business Assistance Agreement
is still in progress. The full amount at risk is R403 million of tax plus
interest and penalties. In terms of the settlement offer, the 20% provision
recognised for the 2006 financial year was maintained.
On 6 September 2007, the Competition Tribunal imposed a R692 million
administrative penalty and other remedies in the case brought before it by gold
miners, Harmony Gold Mining Company and DRD Gold Limited, alleging excessive
pricing. A notice of appeal has been filed by the Company with the Competition
Appeals Court against both the merits and the remedies decisions. The appeal
hearing is expected after the first quarter of 2008. Critically assessed in
terms of the recognition and measurement criteria of IAS 37, Provisions,
Contingent Liabilities and Contingent Assets, no provision has been raised and
no contingent liability quantified.
During the first quarter of 2007, a complaint was referred to the Competition
Tribunal involving accusations by Barnes Fencing Industries of price and payment
condition discrimination on domestic sales of low carbon wire rod products. The
Company filed its answering affidavit on 26 April 2007. Barnes Fencing
Industries since applied for intervention in the process by including additional
complaints against the company concerning alleged contravention of Section 5
(Prohibited virtual practices) and Section 8 (Abuse of dominance) of the
Competitions Act. The intervention hearing is scheduled to be heard in February
2008. No provision has been raised nor any contingent liability quantified in
respect of this complaint.
OUTLOOK
The earnings for quarter four are expected to improve compared to quarter three,
driven by higher production and sales volumes. The international prices for
steel are expected to remain strong during quarter four, supported by higher
demand in the Euro-zone after their holiday season and indications of an
increase in Chinese export taxes which will lead to higher export prices. The
government`s multi-billion infrastructure development programme and inventory
levels which are currently more in equilibrium with demand are expected to
support domestic steel demand during quarter four. However, the movement in the
Rand/US Dollar exchange rate will always have an important impact.
In line with the Company`s intention to implement Black Economic Empowerment,
shareholders are advised that the Company is currently contemplating a Black
Economic Empowerment transaction. Since this initiative is still at the
conceptual stage no further detail is available at this time.
GROUP INCOME STATEMENT
Quarter Year
ended ended
30 30 30 31
September September June December
2007 2006 2007 2006
Rm Rm Rm Rm
Revenue 7 532 7 106 7 312 25 363
Flat Products 4 790 5 020 4 739 17 350
Long Products 2 493 2 022 2 366 7 691
Coke and Chemicals 553 264 502 1 033
Inter Group (304) (200) (295) (711)
eliminations
Operating profit 1 938 1 953 2 141 5 833
Flat Products 997 1 378 1 284 3 550
Long Products 767 568 699 2 100
Coke and Chemicals 208 47 174 184
Corporate and Other (34) (40) (16) (1)
(Losses)/gains on (133) 314 (76) 480
changes in foreign
exchange rates and
financial instruments
Net interest income 135 35 89 193
Income from investments 1 1 1 7
Income/(loss) from 35 (38) 108 195
equity accounted
investments before
taxation
Income tax expense (935) (795) (650) (2 062)
Profit from ordinary 1 041 1 470 1 613 4 646
activities
Profit attributable to:
Ordinary shareholders 1 041 1 470 1 613 4 646
Additional Information
Headline earnings 1 041 1 470 1 613 4 646
Performance per
ordinary share
Attributable earnings 234 330 362 1 042
per share (cents)
Headline earnings per 234 330 362 1 042
share (cents)
PHYSICAL INFORMATION
Quarter Year
ended ended
30 30 30 31
September September June December
`000 tonnes 2007 2006 2007 2006
Flat Products
Liquid steel production 1 148 1 217 942 4 863
Sales 957 1 108 935 4 268
Long Products
Liquid steel production 548 546 549 2 192
Sales 495 488 487 1 926
Total
Liquid steel production 1 696 1 763 1 491 7 055
Sales 1 452 1 596 1 422 6 194
- Local 1 078 1 219 1 109 4 400
- Export 374 377 313 1 794
- Local sales as % of 74 76 78 71
total sales
Registered Office Transfer Secretaries
ArcelorMittal South Africa Computershare Investor Services
Limited
Room N3-5, Main Building 2004 (Pty) Limited
Delfos Boulevard 70 Marshall Street,
Vanderbijlpark, 1911 Johannesburg, 2001
PO Box 61051, Marshalltown,
2107
Directors:
Non-executive: Dr KDK Mokhele (Chairman), DK Chugh, EK Diack, S Maheshwari, LP
Mondi, M Mukherjee, DCG Murray, MJN Njeke, ND Orleyn, M Wurth# Citizen of India
# Citizen of Luxembourg.
Executive: EM Reato (Chief Executive Officer) HJ Verster
JJA Mashaba (resigned with effect 1 October 2007)
Acting Company Secretary: JH Venter
FORWARD-LOOKING STATEMENTS
Certain statements in this release that are neither reported financial results
nor other historical information, are forward-looking statements, including but
not limited to statements that are predictions of or indicate future earnings,
savings, synergies, events, trends, plans or objectives. Undue reliance should
not be placed on such statements because, by their nature, they are subject to
known and unknown risks and uncertainties and can be affected by other factors,
that could cause actual results and company plans and objectives to differ
materially from those expressed or implied in the forward-looking statements (or
from past results).
This report is available on the Company Web site at:
http://www.mittalsteelsa.com. Share queries: Please call the Company Share care
toll free on 0800 006 960 or +27 11 370 7850 if calling from outside South
Africa
Vanderbijlpark
14 November 2007
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 14/11/2007 08:30:01 Produced by the JSE SENS Department.
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